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AP Microeconomics
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economics
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ap
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Occurs when LRAC is constant over a variety of plant sizes
Free-Rider Problem
Perfect competition
Constant Returns to Scale
Marginal Benefit (MB)
2. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Perfectly elastic
Price floor
Monopoly
Free-Rider Problem
3. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Comparative Advantage
Variable inputs
Utility Maximizing Rule
Cartel
4. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Surplus
Price Ceiling
Total Revenue Test
Price floor
5. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Determinants of elasticity
Excess Capacity
Determinants of Supply
Explicit costs
6. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Diseconomies of Scale
Perfect competition
Market Economy (Capitalism)
7. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Total variable costs (TVC)
Variable inputs
Monopolistic competition long-run equilibrium
8. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Spillover costs
Cartel
Average Variable Cost (AVC)
Natural Monopoly
9. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage
Marginal Resource Cost (MRC)
Consumer surplus
Market Economy (Capitalism)
Economics
10. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Perfectly competitive long-run equilibrium
Producer surplus
Shortage
Opportunity Cost
11. Entry of new firms shifts the cost curves for all firms upward
Increasing Cost Industry
Private goods
Specialization
Total Revenue Test
12. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Substitute Goods
Monopoly
Price elasticity
Utility Maximizing Rule
13. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Private goods
Marginal Product of Labor (MPL)
Price Ceiling
Accounting Profit
14. The sum of consumer surplus and producer surplus
Average Total Cost (ATC)
Monopsonist
Total Welfare
Price elastic demand
15. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Price inelastic demand
Derived Demand
Marginal Cost (MC)
Allocative Efficiency
16. Models where firms agree to mutually improve their situation
Demand for Labor
Incidence of Tax
Collusive oligopoly
Income Effect
17. All firms maximize profit by producing where MR = MC
Law of Diminishing Marginal Utility
Profit Maximizing Rule
Private goods
Unit elastic demand
18. The price of a good measured in units of currency
Price inelastic demand
Marginal Resource Cost (MRC)
Absolute prices
Least-Cost Rule
19. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Normal Profit
Unit elastic demand
Marginal Productivity Theory
Break-even Point
20. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Producer surplus
Marginal Revenue Product (MRP)
Long Run
Increasing Cost Industry
21. The total quantity - or total output of a good produced at each quantity of labor employed
Unit elastic demand
Total Product of Labor (TPL)
Law of Increasing Costs
Spillover benefits
22. When firms focus their resources on production of goods for which they have comparative advantage
Price Elasticity of Supply
Specialization
Economics
Necessity
23. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Average Variable Cost (AVC)
Spillover costs
Relative Prices
Profit Maximizing Rule
24. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Allocative Efficiency
Surplus
Profit Maximizing Resource Employment
Total Revenue Test
25. The marginal utility from consumption of more and more of that item falls over time
Comparative Advantage
Law of Diminishing Marginal Utility
Productive Efficiency
Explicit costs
26. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Increasing Cost Industry
Constant cost industry
Complementary Goods
Decreasing Cost industry
27. Product demand - productivity - prices of other resources - and complementary resources
Cartel
Determinants of Labor Demand
Positive externality
Determinants of elasticity
28. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Resources
Perfectly competitive long-run equilibrium
Price Ceiling
Production function
29. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Fixed inputs
Average Product of Labor (APL)
Constrained Utility Maximization
30. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Constrained Utility Maximization
Resources
Productive Efficiency
Monopoly long-run equilibrium
31. Es = (%dQs) / (%dPrice)
Price Elasticity of Supply
Perfectly elastic
Comparative Advantage
Price elasticity
32. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Market Economy (Capitalism)
Profit Maximizing Rule
Production function
Price elasticity
33. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Perfectly competitive long-run equilibrium
Increasing Cost Industry
Short run
Free-Rider Problem
34. The imbalance between limited productive resources and unlimited human wants
Comparative Advantage
Excess Capacity
Implicit costs
Scarcity
35. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Law of Supply
Incidence of Tax
Non-collusive oligopoly
Negative externality
36. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Free-Rider Problem
Decreasing Cost industry
Economies of Scale
Monopoly long-run equilibrium
37. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Subsidy
Positive externality
Least-Cost Rule
Variable inputs
38. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Total Product of Labor (TPL)
Constant Returns to Scale
Cartel
39. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Demand for Labor
Law of Diminishing Marginal Utility
Market Economy (Capitalism)
Incidence of Tax
40. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Scarcity
Economics
Total Revenue Test
Perfect competition
41. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Profit Maximizing Resource Employment
Marginal Analysis
Marginal Benefit (MB)
42. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Four-firm concentration ratio
Production function
Market power
Allocative Efficiency
43. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Income Effect
Public goods
Total variable costs (TVC)
Consumer surplus
44. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Average Total Cost (ATC)
Surplus
Monopolistic competition
45. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Non-collusive oligopoly
Cross-Price Elasticity of Demand
Subsidy
Income Effect
46. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Monopsonist
Normal Profit
Positive externality
Average Fixed Cost (AFC)
47. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Law of Increasing Costs
Free-Rider Problem
Fixed inputs
Non-collusive oligopoly
48. The output where ATC is minimized and economic profit is zero
Perfectly competitive long-run equilibrium
Total Revenue Test
Break-even Point
Marginal Benefit (MB)
49. The mechanism for combining production resources - with existing technology - into finished goods and services
Total Welfare
Normal Goods
Production function
Marginal Product of Labor (MPL)
50. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Non-collusive oligopoly
Perfectly competitive long-run equilibrium
Fixed inputs
Economic Growth
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